Singapore: Economic growth slows in Q3
The economy expanded 6.5% year-on-year in the third quarter according to an advanced estimate, slowing notably from Q2’s 15.2% growth which had marked the fastest expansion since Q2 2010. Meanwhile, in seasonally-adjusted quarter-on-quarter terms, the economy grew 0.8% in Q3, rebounding from the 1.4% contraction recorded in the prior quarter.
The slowdown in annual growth was broad-based. Growth in the services sector almost halved, clocking in at 5.5% year-on-year in Q3 (Q2: +10.8% yoy), while growth in the manufacturing sector fell even further, slowing to 7.5% in Q3 from 18.0% in the prior quarter. Moreover, construction sector activity also slowed, with growth coming in at 57.9% in Q3 (Q2: +117.5% yoy). While robust demand for electronics and semiconductor products supported the overall reading, it was once again inflated by a supportive base effect: Q3 2020 saw a large contraction in activity as a result of the coronavirus pandemic, particularly within the services sector.
The outlook for Q4 2021 and into 2022 appears positive, although most panelists see growth slowing from Q3’s solid outturn. While the easing of entry restrictions for fully vaccinated visitors and the region-leading vaccination drive are likely to support activity going forward, external headwinds and uncertainty regarding the full extent of the expected recovery in demand remain key risks to the outlook.
Irvin Seah, economist at DBS Bank, is optimistic regarding the outlook, commenting:
“A high level of vaccination rate will make for a safe reopening of the economy and allow economic activities (including travel) to resume to normalcy. Progress in this regard has been encouraging. Barring the risks on the efficacy of existing vaccines being weakened as a result of virus mutations or waning antibody levels, the reopening of the economy is expected to provide renewed impetus to growth over the next 12 months. While economic normalisation remains at work and recovery momentum is expected to slow, Q3 2021 GDP growth has surprised mildly on the upside. Furthermore, the GDP growth figure for Q2 2021 has been revised up. Taking all these into account, we have raised full year GDP growth to 6.7%, up from 6.3% previously.”